What is Accidental Death and Dismemberment (AD&D) Insurance?

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Accidental death and dismemberment insurance, also called AD&D insurance, offers coverage for your family if you lose a limb or pass away due to an accident. AD&D insurance is similar to a life insurance policy in that both offer a death benefit, but your beneficiary wouldn’t receive a payout if you died due to an illness. While this makes accidental death and dismemberment coverage less expensive, it also means that you may need additional financial protection for your dependents since the majority of people do not die from an accident.

What Does AD&D Insurance Cover?

AD&D coverage is essentially a combination of two separate policies: accidental death insurance and dismemberment insurance. While they’re purchased together, each portion of the policy has its own terms and is somewhat independent. AD&D insurance can be purchased as a standalone policy or as a rider to another life insurance policy, such as term life insurance. Note if your primary concern is travel-related death or dismemberment, know that your credit card may already provide travel insurance free of charge. We encourage you contact your card issuer to learn more and to consult your benefits pamphlet.

Accidental Death Insurance

The accidental death insurance component is similar to life insurance in that your beneficiary receives a payout if you pass away. However, the policy only pays a death benefit if you die due to a covered accident, such as a plane crash or sudden fall. This means that you can purchase a significant amount of accidental death insurance for a much lower premium than you would pay for a traditional life insurance policy.

While accidents only accounted for 5.4% of deaths in the United States in 2016, they made up 30.2% of deaths for people between the ages of 25 to 44. This is why accidental death insurance typically isn’t worth it if you’re near retirement age or just need coverage for end-of-life expenses. However, it’s a low-cost way to increase your life insurance coverage if you’re a young parent or have significant debt that would be passed on to others, such as small business loans.

Accidental death policies typically have restrictions regarding high-risk activities, such as scuba diving or skydiving, and won’t pay an accident occurs during one of these. However, the list changes by insurer, so you can generally find a company that doesn’t exclude your high-risk hobby. In addition, most insurers will pay a higher death benefit if you passed away while a fare-paying passenger in a “common carrier” accident. Common carriers can include subways, trains, airplanes, ferries, taxis, buses and other licensed forms of transportation.

Dismemberment Insurance

Dismemberment insurance offers coverage if you’re still alive but have lost a limb due to an accident, and some policies offer coverage for paralysis or other injuries as well. The costs associated with losing a limb can be particularly high as you not only have to pay for the immediate hospital expenses, but may also have to cover physical therapy, a prosthetic, and income while you’re out of work.

Payouts for dismemberment are typically listed as a percentage of your policy’s death benefit, with a certain percentage corresponding to each limb (or combination thereof). The most common payout structure is 50% of the death benefit per limb and 100% for the loss of multiple limbs (with the maximum total payout being 100%), but there are often differences by insurer. Here are a few examples:

InjuryAIGSun Life FinancialMassMutual
Loss of thumb and index fingerNone25%None
Loss of a hand or foot50%50%50%
Loss of sight in one eye50%50%50%
Loss of two parts (hand, foot, sight in one eye)100%100%100%
Quadriplegia100%100%None
Paraplegia50%75%None
Hemiplegia50%NoneNone
Loss of speech or hearingNone50%None
Loss of speech and hearingNone100%None

Life Insurance vs AD&D Insurance: What’s the Difference?

The primary difference between life insurance and AD&D insurance is the set of circumstances under which a policy will pay a death benefit. Since AD&D insurance limits payouts to accidents, coverage is significantly cheaper but you may also need life insurance to cover your family in case you pass away due to illness. This is why we would typically recommend accidental death and dismemberment insurance as a supplement or rider to traditional life insurance, but not as a standalone policy.

If you’re concerned about your ability to cover medical expenses, you may favor AD&D’s dismemberment benefits, but these are also restricted to accidents and don’t cover a variety of other medical issues. Term life insurance policies are quite cheap and can come with a variety of riders offering such assistance as disability income, waiver of premiums, and an accelerated death benefit in the case you become permanently disabled.

Types of Group AD&D Insurance

If your company offers group life insurance, accidental death and dismemberment coverage is often provided alongside your policy. Group AD&D plan benefits are structured in the same manner as those for individual policies, but coverage will typically be referred to by a few different names:

CoveragePayerHow it Works
Basic AD&D InsuranceEmployerA set amount of coverage is included as part of your group life insurance policy, similar to a rider.
Supplemental AD&D InsuranceEmployeeYou can purchase optional AD&D coverage in addition to the Basic coverage.
Voluntary AD&D InsuranceEmployeeSimilar to a standalone policy, you can purchase AD&D coverage without having a group life insurance policy.

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